The Warranty Process Flow Within the Automotive Industry: An Investigation of Automotive Warranty Processes and Issues

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This report will focus on how the industry is addressing warranty issues that appear to be systemic in nature, and would thus present significant potential cost exposure.

Theoretically, vehicle manufacturers can address warranty costs via two approaches. First they can proactively attempt, through engineering to reduce expected warranty cost toward zero. While this approach will likely lead to robustly engineered products, and concomitantly higher usage of engineering resources, it also often requires a willingness to accept a higher initial price for component. Alternatively, the manufacturers can attempt to monitor the warranty data and react to in-service incidents. This approach is closely associated with those companies that have a strong cost-focused purchasing bias in their sourcing decision process. Realistically, each vehicle manufacturer uses a combination of strategies with those companies biased more toward the proactive engineering approach, while other tend to place more emphasis on reacting to reported data.

Prepared for the Program on Automotive Practices Sponsored by Microsoft Corporation.